Appreciating Dubai
Appreciating Dubai
Our Property Digest Volume 8 had discussed the
property rental yields for Dubai in 2008. The yield spectrum of 7-10%
has residential returns at the lower end and retail yields at the
other. In a highly uncertain global economy with declining interest
rates, investors are engaged in a quest for appreciable investment
returns and yields.
Dubai's
real estate and property segment is one such investment that is
profitable for short, medium and long term investment. The stagnation
of US and UK property markets augument this argument.
Price appreciation at various residential developments in Dubai
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Considering the present demand and supply, we expect an annual growth
rate of 15-20% in the prices. The rental yields vary between 10% and
7%. International City targets primarily the middle income group.
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At Dubai Marina, we forecast an annual growth rate of 15-17% in the prices. The properties within Dubai Marina fall in the high-income category.
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Comprising both residential and commercial developments, 'Business Bay' has blossomed into a realty goldmine as far as investors are concerned. Here, we expect an annual growth rate of 30-40% for offices and 20-25% for residential properties. Currently, the prices of offices start from Dh3000 per square feet.
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'The Greens' is one of the earliest projects by Emaar and properties at this project initially had relatively low starting prices. But owing to the development’s unique location on Sheikh Zayed Road, and its proximity to TECOM, Emaar Business Park and Business Bay, the Net Asset Value of the properties here, has gone up dramatically. And, we conclude that the prices here will appreciate between 30-35% in 2008; also the rental yields at 'The Greens' are comparatively high, certainly more than 10%. At 'The Greens', there is always demand for properties because they are well-planned and have low maintenance costs when compared to similarly-priced villa communities.
(*Based on current prices. Facts compiled by Gowealthy Research Team after analyzing prices and rents at various projects within afore-mentioned zones. Sources include newspaper classifieds, online advertisements and listings on Gowealthy.com)
A graphical representation of the data provided by IMF in conjunction with authorized bodies in UAE is provided below.
Price index of housing & non-housing sectors in UAE in '07
A report by IMF published in 2008 showed an annual growth of 10-15% in the prices of residential units in the UAE in 2007. After analysing the afore-mentioned segment, we foresee an additional increase of 15-20% in the prices of properties in Dubai in 2008.
Rental yields from hospitality sector
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Real estate is not the sole generator of rental yields in Dubai. An interesting fact that we highlighted in the previous issue was that the rental returns are higher in the retail and hospitality sectors. Tourism and consequently, the hospitality segment hold immense potential in Dubai. The number of visitors to Dubai grew significantly to 6.5 million in 2006 and the government of Dubai aims to reach a target of 8-10 million tourists by 2010. Hotel revenues in Dubai, the Gulf's largest tourism destination, grew 15.74% touching Dh12.5 billion in 2007, up from Dh10.8 billion in 2006. The tourism sector's direct contribution to Dubai's economy is estimated at around 18% while, indirectly its contribution is nearly 30%. A purview of hotels in Dubai reveals that there is a yawning gap between rising demand and supply of usable space, which will definitely go up as major tourist attractions like Dubailand and Dubai Sports City become operational. Dubai’s exponential growth has resulted in very high occupancy levels for hotel rooms and apartments; the occupancy rate in January 2007 stood at 85%. Our research reveals that time is ripe for investors to tap into this expanding market, as rented hotel apartments and rooms now yield 8% returns per annum. For short-term stays, tenants are charged hotel rates and depending on the location and views, owners can demand up to 15% rental yield per year. Most of the hotel apartments and rooms in Dubai are managed by 5-star hospitality chains. |
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‘Al
Burj’ (which means ‘The Tower’ in English) is a super tall skyscraper
proposed in Dubai, United Arab Emirates by master developer Al Nakheel.
When complete, this structure would be over 1.05 km high, surpassing
the current tallest tower, 'Burj Dubai' (512 metres).
In the forthcoming issue, we provide you with detailed information of the projects awaiting delivery in 2008 at various zones across Dubai.
